Why MANY smart people make bad decisions?

By Rajesh Setty | Published on:

Really, nobody wants to make a bad decision. Yet, everyone gets their fair share of bad decisions in their life. Thinking rationally, smarter people should make fewer bad decisions. But, if you look back at your own life or the lives of other smart people you know, that is not the case. They have a fair share of bad decisions – almost the same as any other group.

Something is wrong as there does not seem to be a “smartness” premium offered for decision making.

Digging deeper, there are many reasons for why smart people make bad decisions. Here are some of them:

1. Over-confidence

You are (over) confident about your ability to make a “good” decision. You know you don’t have all the facts but you are (over) confident about your ability to get those facts and make a good decision. Obviously this may work sometime but not all the time. You fall flat on your face when you stretch this beyond a limit.

What makes it worse is that you grow your confidence with every decision you got right and you find something else at fault for every decision that you didn’t get right. In some way, you have an unlimited upside but an insurance policy for the downside covering you from the responsibility of making a bad decision. That leads us to the next point.

2. Defending mediocre decisions

Every day you make some small mistake here and there. You will quickly course correct and move on. Those mistakes won’t move the needle one way or the other. When you make a mistake or take a mediocre decision that others can see, the best option would be for you to admit it and move on to course correct quickly. However, sometimes you might defend that mediocre decision just to ensure that you save your face. Your internal thought – you can just make that mediocre decision better by your creativity and smartness and prove others wrong. This starts a vicious cycle of applying one band-aid over another just to prove that you were right in the first place. Very soon, the system cannot handle that many band-aids and it fails. So, instead of paying the price for making a mediocre decision and correcting it early, you end up paying a higher price for a bigger mistake.

The next reason is a derivative of the above two problems.

3. Overwhelmed in the last mile

This is probably one reason that is not easy to notice. Typically a bigger decision will have a longer lead time. If you use the time available to think through with the available time (and possibly get additional help if required) you can make a better decision. However, it’s your over-confidence or it’s because you are busy, you postpone making that decision for a VERY long time. Of course, a deadline is a deadline and you get very close to the date when you HAVE to make that decision. You roll up your sleeves and start getting a handle on everything that you require to make a good decision. It could be anything from facts available, dependencies, constraints, advice from people you trust, details about the current situation that is relevant to the decision and so on. Time is running out and you start evaluating your options one by one. Every option has consequences and hence more options in further steps. Extending the same logic, you see more options for every step you take. Soon you have a sea of options and possibilities and you want to process all of those options and want to take the BEST decision.

Meanwhile, time is running out and your other project commitments are catching up on you too. Soon you are FORCED to make a decision one way or the other. You don’t want to admit to anyone that you don’t have enough time to make a good decision so you make a decision anyway – mostly a sub-optimal one. Immediately after that you are in the limelight and rather than fixing your decision or buying time you spend the remaining time rationalizing the decision that you just made. Even if someone close to you tries to help you, you are in no mood to listen as going back on your decision would mean accepting your limitations. That’s the last thing you want to do.

So, what should you do if you want to escape this trap?

There are many things but if I have to choose one, one option is to artificially shrink the available time to make a key decision – in other words, advance the deadline for making a key decision. You will go through all the problems that I mentioned above but you have some more time at your hand to fine tune your decision and make it better.

All the best!

Rajesh is a frequent speaker at conferences and companies on
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